With its talks to acquire 97.5% of Daewoo Electronics at an impasse over valuations, Videocon Industries Ltd is now training its sights on a large Japanese brand, say people familiar with the situation.
The company is now eyeing a large Japanese brand as well as another smaller Japanese brand that is in trouble, ever since the talks with Daewoo’s creditors started running into rough weather, said people close to Videocon.
“There is ample opportunity for buying a big global brand considering that several of them are struggling,” said Saurabh Dhoot, a nephew of Videocon chairman Venugopal Dhoot.
Saurabh has been recently inducted into the corporate office of Videocon Industries.
The point of disagreement between Videocon and Daewoo’s creditors seems to revolve around the price. Last year, Videocon and private equity firm Ripplewood Holdings LLC, made an initial bid of $700 million (Rs3,010 crore) for Daewoo, a number that gave the consortium a status of ‘preferred bidder.’
Now, these people who did not want to be named say, Videocon wants a 20% reduction on the price. And the creditors, Woori Bank and Korea Asset Management Company, are not amenable to that.
“The negotiations are still on,” said Dhoot, when asked if the deal was falling apart.
People familiar with the matter also said that Videocon has expressed some reservations about the operations of the Korean electronics firm and the claimed strength of its distribution network.
Daewoo, which has six plants in South Korea and 18 overseas, collapsed in the late 1990s and has seen its valuation plummet, from $3.2 billion in 1999 when Walid Alomar & Associates, a US investing firm, bid for the company to the $700 million that Videocon offered last year.
“The deal can (still) go through if the small investors ask the creditors of Daewoo to reconsider their decision of not accepting Videocon’s negotiated offer,” said these people.
Videocon, which faces the onslaught of Korean brands LG and Samsung in India, has its heart set on acquiring a global brand. It has set a goal of becoming one of the top five consumer electronics companies in the world by 2010.
Videocon’s acquisition strategy revolves around distressed assets overseas.
Dhoot believes his company can turn these around on the strength of economies of scale and access to low-cost components that Videocon makes in India and elsewhere.
For instance, Videocon is the world’s third-largest maker of picture tubes that go into colour televisions.
Videocon, which says it has $500 million of cash and cash-equivalents on its books, acquired Normandie, a European brand of televisions a few months ago.
It now plans to sell over a million TVs under this brand in Germany, Italy and France, said Dhoot’s nephew Saurabh.
Videocon is also planning to start a Cathode Ray Tubes (CRT) recycling business in the US and Europe.
“CRT recycling is a very profitable business as lot of countries offer an incen-tive for this business. We already have manufacturing facilities in Europe and elsewhere to get into this space,” said Saurabh.